Chinese media got a few words from Lin

[admin]

What NQ should be doing is to work out with PWC on the scope of the expanded audit, the fees associated with it, and file the 20-F. Once the audit is complete, file it and then make a public announcement, while have Toro re-classify their shares at the same time so it cannot be lent out, and force a short squeeze.

Hard to disagree with that.

[Makaveli0530]

Not making any excuses for management, but what about the possibility that PwC is trying to get fired? They aren't resigning because they can't point to any legitimate reason, fraud, etc...But they are trying to wait out the clock. Keep expanding the scope until NQ is forced to fire them.  What should NQ do if this is the case (and I'm just speaking hypothetically here)?

[BillNeuburger]

Not making any excuses for management, but what about the possibility that PwC is trying to get fired? They aren't resigning because they can't point to any legitimate reason, fraud, etc...But they are trying to wait out the clock. Keep expanding the scope until NQ is forced to fire them.  What should NQ do if this is the case (and I'm just speaking hypothetically here)?

This is quiite plausible. I would see this as very unethical and unprofessional, but I also think there is a chance for this too, and it has been on my mind. I see PWC seeing NQ as a small enough fish to throw under the bus, without long-term reprecussions. Especially with the public lambasting against the company.

I hope this is not the case, because if it was, then again you would think management would have seen this coming long before we came up with this theory and dealt with it. Instead if they are waiting for the last minute, to replace the auditor, yet again they fed into the short seller's thesis and blow up the stock further, and their integrity is further in question.

problems with replacing PWC:

1. Who can they get to replace them, given D&T's work is it possible they can attain them. Usually if you have Company ABC help with tax work, and Company DEF do your audit, unless you get a waiver from the SEC, COMPANY ABC cannot work perform the audit. D&T did do an audit, so I don't really know how that factors into the "Rule."

2. Without another big 3 firm auditing NQ, this would be terrible, and again feeds into the short thesis.

3. Regulatory issues.

Another theory that I read, from someone seemingly bright was that PWC is annoyed that D&T basically told NQ their controls sucked, (Which is PWC's job) and made recommendations to fix them. Recommendations that NQ has been implementing, and PWC is just dragging this out with no end in sight purposefully. Not sure what kind of validity there could be with this. Obviously unethical but maybe possible. Generally if a company is implementing the fixes an auditor can make a judgement call on those things that are being implemented and those that already are in place.  Maybe PWC wants everything in place, and is going to drag it out to the end to collect as much $ as possible as they will be shown the door for next year. (A guess on getting rid of them after all is said and done)

[gaosl11]

Not making any excuses for management, but what about the possibility that PwC is trying to get fired? They aren't resigning because they can't point to any legitimate reason, fraud, etc...But they are trying to wait out the clock. Keep expanding the scope until NQ is forced to fire them.  What should NQ do if this is the case (and I'm just speaking hypothetically here)?

There are few examples like these. The recent one happened with China company that listed in Hongkong (蜡笔小新 01262-HK). I just read story about this company and seems it's kind of similar with NQ. They are accused of exaggerating sales and profit and auditor requested expand scope but didn't give a specific timeline. The company fired auditor in May and find a new one in June. Looks like story is ongoing.

In order to find new auditor, they seems need seek approval from different sources like bank that offered loans.  It will be a long process and will hit investor's confidence again during the process.

[BillNeuburger]

Just looked at that situation.
1. Crayon (company you brought up) conducted a survey to look into the allegations about the company, at the same time, PWC told them they were going to increase the scope for the audit. (this is how I read the news via Yahoo finance.)

2. NQ hired D&T, and D&T did an extensive review of the company and presented the findings. The review took what 8 months to finish?

3. The similarity here as they are very different in terms of the actions taken by Crayon and NQ is that PWC wants to increase the scope.. Not sure if we can make a true correlation between the two as I doubt fees are even a consideration on NQ's minds.

4. It seems like the whole thing took less than 10 days to get to the resignation of PWC with Crayon, and we are on month 9 with NQ.

So, hopefully this is not a similar case as there are distinct differences, unless of course this is PWC's new method of doing business in China, and just staying away any company considered of wrong doing.

[BillNeuburger]

Sorry, I should clarify it was over 2 months time with the resignation, but the situation does seem different in my view:
http://stockhtm.finance.qq.com/hk/quotpa...2.htm#news

Hard to correlate both as similar enough to come up with a solid idea of what is to come..

[SamAdams]

I believe in that situation the company did the indpendant investigation  without PwC's "blessing" and got it down in like 6 weeks and published before PwC could review.  PwC was well aware of D&T, a world class forensic unity, and did share results before publishing.  In the former example I can asee where that would have ruffled PwC's feathers.  That was the big difference to me.